Exports body seeks 5% interest subvention immediately as high US tariffs delay payments

Seeking resumption of the interest subsidy scheme, the Federation of Indian Export Organisations (FIEO) on Tuesday said the additional 26% US tariffs from April 9 will significantly raise American importers' customs duty bills, delaying payments to Indian exporters.

The organisation urged the government to immediately announce a 5% interest subvention to ease the looming liquidity crunch.

"From April 9, the US importers will have to pay 26% duty upfront. Earlier it was zero-4%. The high tariffs will put an additional burden on them, and for that, they would have to seek credit and delay our payments.

The tariffs are going to impact the payment cycle for us. We request the government to immediately announce an interest subvention scheme for all the exporters," FIEO President SC Ralhan told PTI.

In India, the repo rate stands at about 6.25%, with exporters bearing interest rates ranging between 8 to 12% or even more, depending on the spread and risk assessment of the borrower by the Authorised Dealer Banks.

In competing countries, the interest rate is very low. For instance, the central bank rate in 2025 is 3.1% in China, 3% in Malaysia, 2% in Thailand, and 4.5% in Vietnam.

About 11,000 exporters avail the benefits under the scheme, which ended last year.

The commerce ministry is working to develop the scheme again under the Export Promotion Mission, which was announced in the Budget with an allocation of ₹2,250 crore.

Ralhan also said that buyers in the US are demanding a 12-14% discount to confirm the orders and to minimise the impact of high import duties.

"They are not ready to absorb all the duty. We have to share the burden with them. They are telling us to hold the consignments. Indian exporters can give 3-4% discounts, but not more than that," he added.

When asked about the possibility of dumping by countries like China, Thailand and Vietnam as they are facing more tariffs than India, he said traders are concerned about that and the government should come forward to help them.

"I think imports will go up in the coming months. The government should be ready to impose duties to check dumplings," the Ludhiana-based engineering exporter said.

In 2023-24, the US was the largest trading partner of India, with $119.71 billion bilateral trade in goods ($77.51 billion worth of exports, $42.19 billion of imports and $35.31 billion trade surplus). China was the second largest trading partner with $118.39 billion in two-way commerce ($16.65 billion of exports, $101.73 billion of imports and $85 billion trade deficit).

The US accounts for about 18% of India's total goods exports, 6.22% in imports, and 10.73% in bilateral trade. On the other hand, China's share is just about 4% in exports and a staggering 15% in imports.